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Digital ad spending in the US was forecast to overtake spend on television commercials last year, but the CEO of Turner – which owns CNN, TBS, Cartoon Network, and Adult Swim – says TV is actually experiencing a resurgence.
Speaking to Business Insider at Mobile World Congress in Barcelona earlier this week John Martin explained that advertisers are switching some of their digital budgets back to TV because they feel it offers a better measureable return on investment.
He said: “I don’t want to make any bold predictions again, but we are starting to see money come back into TV that was previously being redirected into digital because … [of] the efficacy of television.”
Martin said TV companies have more data available to be able to offer advertisers audience guarantees, deliver specific types of audiences, and measure back how their commercials performed.
“If you think about it, that’s really the best of all worlds because we’re trying to take what has made digital unique and bring it into the immersive television experience,” Martin said. “If we can continue to successfully do that, I think we’re going to be great.”
Martin said TV has been reaping the rewards after “some of the digital companies” that had problems with their metrics – likely referring to the high-profile measurement mistakes made last year by Facebook and Twitter.
“Some of the digital companies you have seen have had problems with metrics and KPIs, so there’s a little bit of suspicion around exactly if the marketers are getting what they thought they were getting when they paid for it,” Martin added.
Indeed, in a speech at an Association of National Advertisers event in Florida earlier this week, Marc Pritchard, the chief marketer at P&G – the world’s largest advertiser – heaped pressure on digital platforms like Google and Facebook to work harder to get their ad metrics verified and audited.
Martin predicts the upfronts will be ‘solid’ this year
Every year, the TV industry throws a huge dog and pony show called the upfronts. Each network gets all their biggest talent and executives on stage to present to an audience of ad buyers about why they should commit an “upfront” level of spend for the following season.
For TV networks, the advantage of the upfront is to create a short window to lock in their ad sales. Ad buyers are meant to get a discount for buying in bulk and the guarantee that their clients’ ads will appear next to all the best programming. The TV networks get some clarity about their projected revenues for the year.
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TV ad buying has worked in this way since ’60s.
But last year, as Variety reported, the upfront was slower than expected as deals stalled over pricing. Uncertainty about the economy also led some advertisers to hold back on making upfront commitments. Instead they bought in the “scatter” market, nearer to the time the ads actually aired. Broadcasters can charge premium rates for their ads in the scatter market, but it also leaves them with more uncertainty over whether they can meet their sales targets compared to securing upfront spend.
Martin said: “One thing that was for certain last year is the money that was held out and held on the sidelines – people paid huge premiums in the scatter market. So that’s the decision that people are going to have to make again: Do they think the economy in the US is going to be strong enough that scatter will be strong and whether they are going to make upfront commitments or not.”
He continued: “There’s more inventory available than ever before, so there’s more opportunities for advertisers to hold back. But ultimately I think the money showed up. I mean, our organic US ad revenue last year was pretty good, pretty strong against the headwinds of some of the ratings challenges that we and other networks are having … so we’ll see. I think the upfront will be solid, but it’s a little early to predict.”
Turner grew revenue by 7% year-on-year to $11.4 billion in 2016. The company, which is owned by Time Warner, said it benefited from a 12% increase in subscription revenue and a 3% lift in ad revenue, which was boosted by its news and sports businesses.